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Home  /  Domestic Economy • Petrochemical  /  Chemical Parks: For the Next Sectoral Quantum Jump
27 September 2023

Chemical Parks: For the Next Sectoral Quantum Jump

Written by Deepak C. Mehta
Domestic Economy, Petrochemical Leave a Comment
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By: Deepak C. Mehta

Importance of the Chemical sector is well known to all the stakeholders and needless to say growth of the sector will be a cornerstone for the nation’s collective USD 5 trillion dream. Amidst currently experienced global headwinds, including from China, Indian Chemical & Petrochemical Industry needs to continue its growth momentum and maintain optimism to meaningfully participate in India’s growing chemical consumption. This is a pre-requisite for Indian Chemical Sector to leapfrog to its target of USD 1 Trillion by 2040. In essence, our industry is at an inflection point and is at the juncture where “right” actions taken today will have “disproportionate beneficial” influence on both sector and the Country for decades to come.

One such action will be around getting more traction around Chemical Parks which are essentially integrated & interdependent Chemical & Petrochemical manufacturing hub(s). Globally, it’s proven that Chemical Parks are quite essential creating cost competitive downstream units and have sustained competitive advantage over standalone similar sized units. We have been working on the idea of Chemical Parks since early 2000’s and already have PCPIR (Petroleum, Chemicals and Petrochemicals Investment Region) policy. PCPIR policy has met with limited success so far and has failed to create ‘interdependent and integrated’ manufacturing hub for Chemicals & Petrochemicals. Despite that, the sector continued to grow throughout the last two decades on the back of intrinsic individual strength while also getting support from global tailwinds from time to time. However, we still lag in terms of overall size and diversity of the industry and have to continue to rely on imports to a great extent.

As we face the ripples of geopolitical conflicts like the Ukraine -Russia war, destabilising of the supply chain for critical feedstock, flash price spikes hampering smooth operations and humongous capacity additions in China across value chains; we are staring at next few years which will be challenging in terms of sustaining margins. However, this is also a time when we prepare ourselves for future and create integrated, interdependent, and sustainable platform for the “Industry of the Future” in the form of Chemical Park(s).

A clarion call for the future is for us to be resilient, reinvent and reinvest in ourselves. To remain competitive, we need to be invested in the process of change by increasing our intellectual quotient, upgrading our infrastructure, innovating via R&D, adopting forward & backward integration strategies for world-scale production facilities and sustainability-oriented approaches. We will be able to navigate the undercurrents of challenges if we conduct ourselves with optimism, albeit vigilant one, and agile responsiveness. In addition to much awaited sector specific Production Linked Incentive (PLI) scheme, developing dedicated integrated manufacturing hubs under PCPIR/Chemical parks will surely attract large investments from both domestic and international players. We will need to create an ecosystem that creates facilities (such as on-purpose building block manufacturing, utilities, common-infrastructure) with economies of scale and bring in much needed Competitive Advantage. The need to do a thorough assessment around structuring of Chemical Parks and evaluation of factors such as product specific or value chain driven or common chemistry infrastructure driven (phosgenation, cyanation etc.) is critical.

We should deliberate on the role of private sector in development of such Chemical parks and whether there is need for private sector to play larger role in the Design & Operations of Chemical Park rather than being limited as an investment partner. We need to fast learn from how such successful chemical parks were created in other geographies and quickly customise solutions relevant for our needs, carefully considering our unique strengths. As we work on the mission of ‘Atmanirbharata’, we must acknowledge ‘Development of world-scale Chemical Parks’ is a necessary, a must condition and no longer an option. We, therefore, need to take a Quantum Jump, and not just a Leap of Faith.

The author is Chairman, FICCI National Chemical Committee and CMD, Deepak Nitrite Limited

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